Insights by Stanford Business, August 24, 2022
by Theodore Kinni
|iStock/Alexey Yaremenko
The conventional wisdom holds that disruptive innovation is beyond the ken of large, incumbent companies. But then there are companies like Microsoft, which transformed its ubiquitous Office software suite into the Office 365 subscription service. “If Microsoft had done that as a startup, it would be a multi-unicorn,” says Andrew Binns, a founder and director of the strategic innovation consultancy Change Logic. “Office 365 is a whole new business model, but nobody talks about it as disruptive innovation.”
Binns, along with Charles O’Reilly, a professor of organizational behavior at Stanford Graduate School of Business, and Michael Tushman of Harvard Business School, finds that more and more established companies are overcoming the obstacles to innovation with the help of what they call corporate explorers. Corporate explorers are managers who build new and disruptive businesses inside their companies. Sometimes with a formal mandate, sometimes not, they use corporate assets to support and accelerate the development of these new ventures.
Binns, O’Reilly, and Tushman studied a number of these entrepreneurial insiders and report their findings in The Corporate Explorer: How Corporations Beat Startups at the Innovation Game. The book builds on the trio’s continuing research into ambidextrous organizations — companies that succeed over the long haul by simultaneously exploiting their existing businesses and building new ones that drive future growth.
In a recent interview, O’Reilly and Binns described the traits of corporate explorers and the conditions they need to thrive. Read the rest here.
Thursday, August 25, 2022
How “Corporate Explorers” Are Disrupting Big Companies From the Inside
Wednesday, December 8, 2021
Break Out to Open Innovation
Image courtesy of Daniel Garcia/theispot.com
Mercedes-Benz AG produces over 2 million passenger cars annually for a global market in the throes of transformation. Automakers are meeting new demands for electrification and connectivity, new competitors are arising, and customers have new expectations, such as the desire for sustainable mobility. All of these trends are driving the need to speed innovation in every facet of the automotive industry.
In 2016, R&D and digital business managers at Mercedes’s headquarters in Stuttgart, Germany, realized that their efforts to collaborate with startups — a valuable source of external innovation — were being hampered by the company’s existing innovation processes. Those processes were overly focused on internal development and ready-to-implement solutions provided by the company’s established base of suppliers and weren’t well suited to uncertainty-ridden collaborations with promising technology startups. The company needed an innovation pathway capable of more effectively integrating startups earlier in the R&D process and significantly reducing the time required to identify, develop, test, and implement their most promising technologies and solutions.
In response, a new team within R&D was formed to build a better bridge between the promising ideas of external startups and the innovation needs of Mercedes’s internal business units. The team joined forces with partners from academia and industry to cofound Startup Autobahn, what we call an open corporate accelerator (CA). Unlike a conventional corporate accelerator — typically established by a single company for its own benefit — an open CA welcomes multiple sponsor companies and can attract a broader array of more mature startups. This model, also known as a consortium accelerator, improves sponsor access to external innovation and enhances the overall competitiveness of regional ecosystems...read the rest here
Thursday, September 3, 2020
Competing on Customer Outcomes
Learned a lot lending an editorial hand here:
MIT Sloan Management Review, September 2, 2020
by Marco Bertini and Oded Koenigsberg 
Image courtesy of Richard Borge/theispot.com
In his 1969 book The Marketing Mode, Harvard Business School professor Theodore Levitt immortalized a gentleman named Leo McGivena, who reportedly said: “Last year 1 million quarter-inch drill bits were sold — not because people wanted quarter-inch drill bits but because they wanted quarter-inch holes.” A half-century later, this insight is as compelling as it ever was — customers still want to buy meaningful outcomes (a particular sensation, a tangible benefit, or some combination of the two), not products and services. What’s changing is companies’ ability to become more accountable for those outcomes by helping customers navigate three critical checkpoints: accessing the solution, consuming (that is, experiencing or using) it, and getting it to perform as expected or above expectation.
Even so, most companies do not stake their success on these checkpoints. Instead, they sell quarter-inch drills and promise customers that the quarter-inch holes they desire will follow. Indeed, a revenue model focused on transferring the ownership of a product or service to the buyer may appear prudent because revenue accrues up front, and any risk associated with access, consumption, and performance is passed on to customers. But in reality it places an unnecessary burden on customers and ultimately shrinks the opportunity in the market. This contraction occurs when, for instance, customers are priced out or forgo a purchase because it is inconvenient, when they perceive ownership as too risky and decide not to buy, and when they resolve to pay less to account for the possibility that they will not make sufficient use of their purchase or that it will not perform as advertised.
Technological advances are enabling companies to rewrite the rules of commerce. Mobile communication, cloud computing, the internet of things, advanced analytics, and microtransactions offer sharper, more timely information that can illuminate when and how customers access and consume their products and services, and whether and how well those products and services perform. We call this information impact data — it enables companies to track and understand what happens to their solutions beyond the moment of purchase.
The way we see it, impact data — and the technologies that deliver and analyze it — is transforming corporate accountability for customer outcomes from a fashionable marketing slogan into a strategic imperative. Some organizations dismiss this imperative, hoping that it is another passing trend. Others (often intentionally) make their prices more ambiguous and thus less comparable across competitors, which impedes sound purchasing decisions on the customer side. These will not be winning plays in the long run. Instead, companies should start to embrace accountability for outcomes and change their revenue models accordingly before they are forced to do so by more enlightened competitors and disruptive startups.
In this article, we’ll describe three types of revenue models that can help companies win customers and drive growth in today’s increasingly transparent markets. The framework draws on insights from our respective academic areas of behavioral economics and operations, our research, and our ongoing interactions with companies. We’ll also provide guidance on developing and implementing the right revenue model for your company, unlocking the untapped market potential of your solutions, and capturing the lion’s share of the resulting value... Read the rest here
Wednesday, April 22, 2020
5 Musts for Next-Gen Leaders
Learned a lot lending an editorial hand here:
MIT Sloan Management Review, April 22, 2020
by Amit S. Mukherjee 
Image courtesy of Gordon Studer/theispot.com
Effective leadership isn’t ageless or immutable. Periodically, new technologies overturn established modes and sweep aside executives who don’t adapt.
For most of the 20th century, after transformative technologies made it possible to measure the minutiae of human work, leaders concentrated on maximizing productivity and efficiency, many taking a command-and-control approach. But this autocratic style failed disastrously when upstart Japanese companies used newer technologies — focused on quality — to enter Western markets. In the mid-1980s, unwilling to make the organizational and leadership changes required by this shift in competition, American companies went bankrupt at rates not seen since the Great Depression. Those that survived augmented their long-standing functional silos with teams that enabled cross-functional collaboration, while their leaders learned to empower employees to make decisions.
Today, business is being transformed again — this time by digital technologies. They render some elite skills obsolete and widely distribute others; make work more thought-driven than muscle-powered; shed light on unpredictable customer needs that create disproportionate value; reveal information regardless of the merits of concealment; and affect — and are affected by — environmental conditions near and far. They also connect companies and employees by distributing work across geography and over time.
Current and aspiring leaders must respond to this new wave of change in five key ways. Read the rest here.
Tuesday, April 14, 2020
Joel Peterson: How Entrepreneurs Should Lead in Times of Crisis
Insights by Stanford Business, April 14, 2020
by Theodore Kinni
iStock/DrAfter123
One Saturday afternoon in 2016, Diana Peterson left home for a 4-mile hike in Millcreek Canyon, just outside Salt Lake City, and disappeared. As darkness fell, her husband, Joel, began calling family members to see if anyone had heard from her. A short time later, Diana’s car was located at a trailhead and a search-and-rescue mission was launched.
As morning broke, cadaver dogs were called in and Joel Peterson drove home to find some of his wife’s clothing so the dogs could track her scent. Morbidly, he found himself composing her obituary. Happily, he didn’t need to finish it. As he arrived back at the canyon, Diana reappeared. She had a shattered wrist and was exhausted, but she was alive.
It’s an odd story to find in a book on leadership, but Peterson — a long-time Stanford Graduate School of Business adjunct professor and the chairman of JetBlue — eventually came to see the harrowing incident as a metaphor.
“Just as Diana knew all about flashlights, trail mix, water bottles, walkie-talkies, the importance of hydration, of staying on trails, and of not hiking on trails after dark or alone, in theory our students know about the perils of entrepreneurship and the requisite principles of effective leadership,” he writes in the introduction to his new book, Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others, and Running Stuff. “They are well-prepared in theory, but not in practice.”
The book is Peterson’s way of addressing this gap between leadership theory and practice. In it, he offers the same practical framework — the “set of principles, mind-sets, and self-talk” — that he has used to good effect in his life and career. Here, based on excerpts from a recent interview and the book itself, Peterson offers four key pieces of advice for leaders facing crises — such as the current COVID-19 pandemic and the economic chaos it has spawned. Read the rest here.
Sunday, February 9, 2020
Inside Mexico's Anemic Economy
LinkedIn, February 9, 2020
by Theodore Kinni
They say ignorance is bliss and it certainly used to feel that way whenever I ate a tortilla chip laden with guacamole. But now, because journalist Nathaniel Parish Flannery chose avocados, along with coffee and mezcal, as the principal entry points for his boots-on-the-ground exploration of the Mexican economy, Searching for Modern Mexico, I know a little too much about the main ingredient of guacamole to enjoy it’s creamy, green goodness as much as I once did.
Most of the avocados Americans consume come from Michoacán, a state located west of Mexico City that stretches to the Pacific Ocean. In 1995, the year after the North American Free Trade Agreement (NAFTA) was signed, Michoacán exported 45,600 tons of avocados. In 2015, it exported nearly 775,000 tons valued at $1.5 billion. But if this sounds like a free-trade success story, it’s not so much.
The wealth generated by avocados not only enriched Michoacán’s farmers, explains Flannery, but it also attracted criminals, many of them former members of drug cartels. These gangs of gunmen demanded 30-40 percent of the earnings of avocado producers as “protection money.” The gangs tortured and killed anyone who refused to pay, dumping the mutilated bodies in public squares as a warning.
The police and armed forces of Mexico’s local, state, and federal governments were unable to stop the killing, so the avocado growers of Michoacán formed and funded their own gangs, vigilantes called the autodefensa. A running battle ensued that continues today. Caravans of gunmen armed with automatic weapons speed through avocado country fighting for control. Gangs have splintered and reformed until it is impossible to tell the good guys from the bad guys. Cities and towns have been transformed into armed camps, with private armies manning turrets and barricades.
“The government doesn’t rule here, but it’s under control,” a grower in the city of Tancítaro tells Flannery. “You can relax.” Meanwhile, in the U.S., we are mashing avocados into guacamole as little as 30 hours after they were picked in Michoacán. Read the rest here.
Wednesday, November 27, 2019
Becoming your most charismatic self
strategy+business, November 27, 2019
by Theodore Kinni
Photograph by Klaus Vedfelt
Peter Drucker, my favorite managerial touchstone, didn’t think much of leadership charisma. You can almost hear him grinding his teeth as he describes, in his 1992 book, Managing for the Future, being asked to run a seminar on “how one acquires charisma” by a vice president of HR at a big bank.
It’s the prelude to a bit of a rant. “History knows no more charismatic leaders than [the 20th] century’s triad of Stalin, Hitler, and Mao — the misleaders who inflicted as much evil and suffering on humanity as have ever been recorded,” Drucker fumes. “But effective leadership doesn’t depend on charisma. Dwight Eisenhower, [former Secretary of State] George Marshall, and Harry Truman were singularly effective leaders, yet none possessed any more charisma than a dead mackerel.”
Drucker’s antipathy toward charisma is understandable. An Austrian working in Germany, he witnessed the rise of Adolf Hitler, and he was forced to flee to London a few months after Hitler was appointed chancellor in January 1933. But Drucker may have gotten this one wrong: He seems to be conflating the effects of charisma with the ends to which it is applied.
It appears, upon further reflection, that charisma does contribute to leadership effectiveness. “A meta-analysis of data spanning close to a quarter of a century has shown that charismatic leaders not only possess an ability to inspire their troops to ever higher levels of performance, but also simultaneously embed deeper levels of commitment in their psyche,” report academics Stephen Martin and Joseph Marks in their book, Messengers: Who We Listen To, Who We Don’t, and Why.
Sounds promising. But what if a leader indeed possesses no more charisma than a dead mackerel? Can it be cultivated? Read the rest here
Wednesday, August 14, 2019
The Greatest Showman on Earth
strategy+business, August 14, 2019
by Theodore Kinni
Phineas Taylor Barnum’s future was bright. He believed from the age of 4 that his grandfather, pleased to have his grandson as his namesake, had purchased the most valuable farm in Connecticut in Barnum's name. For years, the boy’s grandfather talked about the farm and his neighbors congratulated him on being the richest child in the town of Bethel. At the age of 12, Barnum was taken to see his farm. It was five worthless, inaccessible acres in a large swamp. Everyone had a great laugh.
Robert Wilson, editor of the American Scholar and author of Barnum, sees the roots of the 19th-century American showman’s outsized pecuniary drive in “this strangely cruel and astonishingly drawn-out joke.” But it’s hard to judge whether the story is true — the only citation Wilson offers is Barnum’s autobiography, which should give the reader pause, considering its author’s reputation for humbug and penchant for spinning his own life story.
If Barnum didn’t stretch the story (or invent it outright), it also may reveal the roots of his preternatural talent for hucksterism. Certainly, he elevated the joke to unprecedented heights with a series of frauds so entertaining to American and European audiences of every social class that instead of shunning him, they rewarded him with riches that beggared the promise of the farm that never was. He also provided an early and, sadly, enduring lesson in the use of brazen hype, shameless self-promotion, and fake news as the basis of a successful business. Read the rest here.
Sunday, June 2, 2019
Managerial hubris brought down MacArthur
strategy & business, May 29, 2019
by Theodore Kinni
Photograph by Pictorial Press Ltd / Alamy
I find hubris to be a fascinating cognitive flaw. Perhaps the spectacle of arrogance leading to a fall from grace provides a socially acceptable outlet for my predilection for schadenfreude — another obnoxious personality glitch. But my flaws don’t matter all that much. I’m not a leader.
For leaders, the consequences of cognitive flaws like hubris are magnified. And nowhere is the danger of managerial hubris more evident than in the career of General Douglas MacArthur, whose life and career I studied for my book No Substitute for Victory: Lessons in Strategy and Leadership from General Douglas MacArthur. In June 1950, when President Harry Truman appointed him to head the United Nations Command at the start of the Korean War, MacArthur was already a prime candidate for hubris. He had served as commander of the U.S. Army Forces in the Pacific in WWII and was still, at age 70, serving as the de facto leader of postwar Japan and its more than 80 million citizens. He was, as biographer William Manchester put it, an “American Caesar.” It is unlikely that MacArthur would have objected to the characterization, had he been alive to hear it.
If MacArthur had an elevated sense of ego and invincibility by 1950, his initial success in prosecuting the Korean War surely reinforced the feeling. As the UN forces fought to hang on at Pusan, their last foothold on the Korean Peninsula, MacArthur mounted an audacious, large-scale amphibious attack well behind enemy lines at the port city of Inchon. The plan was risky, if not foolhardy: Inchon’s 30-foot tides are so extreme that the window for making the assault was limited to two days in September. Moreover, if the landing forces had been unable to take the port, they would have been trapped.
As it turned out, the Inchon invasion was a complete success. The North Korean Army reeled in surprise, and a day later, the UN forces at Pusan broke out. Within two weeks, the invaders had been expelled from South Korea and the UN forces crossed the 38th Parallel, heading north to the Chinese border. The stage was set for one of the 20th century’s most dramatic exhibitions of hubris. Read the rest here.
Monday, October 29, 2018
Leading a Bionic Transformation
Learned a lot lending an editorial hand here:
strategy+business, October 29, 2018
by Miles Everson, John Sviokla, and Kelly Barnes
Illustration by Mark Matcho
What is it about companies such as Alphabet, Amazon, Apple, and Alibaba? No matter where they turn their attention — cars, banking, groceries, healthcare, media, retail, trucking — industries quail before them. Company leaders start wondering if their moats are deep enough. Investors flee before the drawbridges rise. These companies are among the largest and richest in the world, and they use this leverage to become larger and richer still — in 2018, Apple and Amazon became the world’s first trillion-dollar companies. These powerhouses attract huge numbers of extremely talented people to work for them, and they generate one innovation after another. But none of that explains the source of their industry-disrupting power.
There are probably 100 companies around the world — including at least 40 “unicorns,” startups with a market capitalization of US$1 billion or more — with similar qualities. They are known for rapid, exponential success. Most are in the U.S. and China right now, but they will probably become more common elsewhere soon. We think of them as bionic enterprises: a name that evokes the fusion of technological and biological systems for extraordinary performance and growth. These companies compete in unprecedented ways by combining digital prowess, human ingenuity, and strategic purpose, as if they were the corporate equivalent of superhuman cyborgs such as Marvel Comics’ Iron Man.
Over the past year, as we’ve been researching and writing about the nature of bionic companies (see “The Bionic Company,” by Miles Everson and John Sviokla, s+b, Feb. 22, 2018), it’s become apparent that no company has a monopoly on this way of doing business. A few companies are out in front, but many others will follow. Some will be part of consortia; some will take advantage of highly capable platforms. You can lead your own company toward a bionic transformation if you think about changing your business in the following ways.
• From a business model based on managing the supply of your product or service to one based on providing whatever customers demand, using any means possible
• From an operational approach based on stocks of information that you hold and capture, to one based on flows of knowledge that you collaborate on and share
• From a competitive position based on a stable landscape of rivals to one based on platforms where a single winner dominates the system
Underlying these three shifts of mind is a quiet revolution in the sources of wealth that businesses deploy and create — the first such major shift since the Industrial Revolution. These new intangible (but very powerful) assets are behavior capital, the awareness and insight developed by tracking ongoing activity; cognitive capital, knowledge codified into digitally managed routines; and network capital, the human and technological connection points available to an enterprise (see “Wealth in the 21st Century”). When you deploy these three forms of capital effectively, you transform your enterprise...read the rest here
Friday, October 26, 2018
Why It Doesn’t Always Pay to Be Decisive about Making Decisions
strategy+business, October 26, 2018
by Theodore Kinni
Banal bromides are my pet peeve. They all sound like the wisdom of the ages, until you think about them for a few seconds and discover they don’t make any sense at all. Consider this one, which popped up in my LinkedIn feed the other day: “The best time to make a decision is before you have to.”
This is nonsensical, if not downright dangerous. Why would you make a decision before you have to?
For starters, if you wait, you may find that you don’t need to make the decision at all. I once worked closely with a leader whom I admired and respected, except for what I thought was a bad habit of dithering with decision requests. He wouldn’t offer rulings on even simple matters. It took me a while to realize that the decisions he sidestepped resolved themselves — either something changed that eliminated the need for the decision or it was made in a collegial way by the people directly involved. It was less a bad habit than a refusal to micromanage.
Photograph by Westend61
Let’s assume that eventually you will have to make an important decision, though. If you make it before you have to, you’re betting that nothing is going to change before the time comes to act on it. Given the speed of change these days, what are the odds of collecting on that bet?
If, as is likely, conditions do evolve, you’ll need to reconsider your decision. That means at least some wasted work. But worse, it opens you up to a cognitive heuristic that psychologists Daniel Kahneman and Amos Tversky named “anchoring-and-adjustment.” They found that when people have an anchor in mind — a numerical estimate, for instance — and then receive new information that requires rethinking it, the adjusted estimate tends to hew too closely to the anchor. In other words, if you make a decision before you have to, and then the conditions on which it was based change, you probably will not make the proper adjustments. The result: a suboptimal decision.
What should you do instead? Read the rest here
Saturday, March 10, 2018
Seven Technologies Remaking the World
Learned a lot lending an editorial hand here:
MIT Sloan Management Review, March 9, 2108
by Albert H. Segars
This report provides executives with a lexicon to the revolution. It identifies seven core technologies — pervasive computing, wireless mesh networks, biotechnology, 3D printing, machine learning, nanotechnology, and robotics — and describes their implications for commerce, health care, learning, and the environment. Use it as a guide and a basis for strategic discussion as you and your team seek to understand today’s business frontiers and the opportunities that lie ahead.
Seven Technological Sparks
“You’re only given one little spark of madness,” said the late actor and comedian Robin Williams. “You mustn’t lose it.” Williams used his spark to ignite his comedic rocket and blast past the established boundaries of his craft. Technology provides a similar spark: It enables us to push beyond the established boundaries of our world.
The mechanized spinning of textiles, large-scale manufacturing of chemicals, steam power, and efficiencies in iron-making sparked the first Industrial Revolution (1760-1840). Railroads, the telegraph and telephone, and electricity and other utilities sparked the second Industrial Revolution (1870-1940). Radio, aviation, and nuclear fission sparked the Scientific/Technical Revolution (1940-1970). The internet and digital media and devices sparked the Information Revolution (1985-present). In each instance, the inflection point that marked the new revolution was the appearance of new technologies that fundamentally reshaped key aspects of the world, such as commerce, health care, learning, and the environment.
Today, we see technological sparks everywhere. They are emerging from the digital, chemical, material, and biological sciences, and they are precipitating a revolution that is altering nearly every dimension of our lives.
But what are the dominant technologies driving this revolution? And how will they shape and reshape the world of commerce — and the world at large? These are critical questions for executives, and the answers will determine how value will be defined in the future, how businesses will be structured and managed, and where new opportunities for profitable growth may lie.
To help executives answer these questions, I conducted two surveys of veteran technology entrepreneurs working in companies in a variety of sectors, analyzed the results, and then developed and assessed the validity of the findings in a series of individual interviews and field visits. The study revealed seven classes of technology that are driving today’s universal revolution: pervasive computing, wireless mesh networks, biotechnology, 3D printing, machine learning, nanotechnology, and robotics.
Each of these technology classes exhibits three distinctive and rapidly evolving capabilities that are significantly different, more advanced, and larger in scope than the technologies of past revolutions. Read the rest here.
Wednesday, February 28, 2018
A Better Way to Bring Science to Market
Learned a lot lending an editorial hand here:
MIT Sloan Management Review, Feb. 28, 2018
by Joshua S. Gans
In 2012, when the Creative Destruction Lab (CDL) at the University of Toronto’s Rotman School of Management was launched, the audacious target of this seed-stage program for massively scalable, science-based companies was $50 million in equity creation in five years. In 2017, CDL companies surpassed $790 million in equity creation. Such is the power of a market for judgment.
A market for judgment is a nexus between science and technology. By science, I mean the kind of knowledge that is produced in academic institutions and research labs. By technology, I mean the commercial application of that knowledge. A market for judgment is a place, like CDL, where the producers of knowledge meet and mingle with businesspeople and investors.
Markets for judgment are necessary and valuable because science and technology are mismatched in several ways. They are mismatched in geographic terms: Science is concentrated in universities, which are located all over the world; technology aggregates in a few places, such as California’s Silicon Valley and Cambridge, Massachusetts, in the U.S. The landscape of science is the gently undulating Great Plains whereas the landscape of technology spikes like Mount Olympus.
The distribution of scientific and technological talent is also mismatched. I think that may be because of the antithetical nature of the two jobs. Scientists are supposed to go down fruitless paths; it’s part of their process. Technologists are supposed to go down fruitful paths; in their process, fruitless paths are decidedly unwelcome and potentially destructive.
In short, although science and technology are supposed to go hand in hand, they usually can’t get that close. CDL was designed to determine if we could bring science and technology closer together by building a market for judgment. Read the rest here.
Monday, February 19, 2018
The Power of a Free Popsicle
Insights by Stanford Business, Feb 19, 2018
by Theodore Kinni
Los Angeles boasts plenty of terrific hotels. At this writing, the top three on TripAdvisor are the Beverly Hills Hotel, Hotel Bel-Air, and the Peninsula Beverly Hills. If you can get a room at any of them for under $700 per night, TripAdvisor says you’re getting a “great value.”The fourth name on the list is the Magic Castle Hotel. You can snag a room there for $199, but TripAdvisor doesn’t call that out as a great rate. The Magic Castle Hotel, as Chip Heath, the Thrive Foundation for Youth Professor of Organizational Behavior at Stanford Graduate School of Business, describes it, “is actually a converted two-story apartment complex from the 1950s, painted canary yellow … [with] a pool that might qualify as Olympic size, if the Olympics were being held in your backyard.”
How does the Magic Castle Hotel maintain such an enviable TripAdvisor ranking among the 355 hostelries it lists in LA? In their new book, The Power of Moments, Heath and his brother, Dan Heath, a senior fellow at Duke University’s CASE Center, trace it to the hotel’s ability to create “defining moments.” These moments, they say, are ones that bring meaning to our lives and provide fond memories.
One of those defining moments is the Popsicle Hotline. Visitors at the hotel’s pool can pick up a red phone on a poolside wall to hear, “Hello, Popsicle Hotline.” They request an ice-pop in their favorite flavor, and a few minutes later, an employee wearing white gloves delivers it on a silver platter, no charge. It’s a small defining moment that doesn’t cost much to produce, but has paid off for the Magic Castle Hotel.
In The Power of Moments, the Heath brothers identify four metatypical defining moments. Elevation moments transcend ordinary experience, like the arrival of an ice-pop on a silver platter. Insight moments rewire our understanding of the world, like George de Mestral pulling burrs from his clothes after a hike and getting the idea for a new kind of fastener that he named Velcro. Moments of pride accompany achievement, which is why employee recognition is such a powerful tool. And moments of connection — like weddings, graduations, and retirements — strengthen relationships. Read the rest here.
Friday, February 9, 2018
The End of Scale
Learned a lot lending an editorial hand here:
MIT Sloan Management Review, Feb. 9, 2018
by Hemant Taneja with Kevin Maney
For more than a century, economies of scale made the corporation an ideal engine of business. But now, a flurry of important new technologies, accelerated by artificial intelligence (AI), is turning economies of scale inside out. Business in the century ahead will be driven by economies of unscale, in which the traditional competitive advantages of size are turned on their head.
Investments in scale used to make a lot of sense. Around the beginning of the 20th century, the world was treated to a technological surge unlike any in history. That was when inventors and entrepreneurs developed cars, airplanes, radio, and television, and built out the electric grid and telephone system.
These new technologies ushered in the age of scale by enabling mass production and offering access to mass markets. Electricity drove automation, allowing companies to build huge factories to churn out a product in massive quantities. Radio and TV reached huge audiences, which companies tapped through mass marketing. The economies of scale governed business success.
Scale conferred an enormous competitive advantage. It not only lowered fixed costs — it also created a forbidding barrier to entry for competitors. Organizations of all kinds spent the 20th century seeking scale. That’s how we ended up with giant corporations, and universities with 50,000 students, and multinational health care providers.
Today, we’re experiencing a new tech surge. This one started around 2007, when mobile, social, and cloud computing took off with the introduction of the iPhone, Facebook, and Amazon Web Services (AWS), respectively. Now, we’re adding AI to the mix. AI is this century’s electricity — the technology that will power everything.
AI has a particular property that supplants mass production and mass marketing as a basis of competitive advantage. It can learn about individuals and automatically tailor products for them at scale. This is how the GPS navigation app Waze gives you a route map tailored to your destination at a specific moment in time — a map that probably won’t work for anyone else or at any other time and doesn’t need to. AI enables mass customization for increasingly narrow markets. If a product is custom built specifically for you, you’ll probably prefer it to a product that’s built for millions of people who are only kind of like you.
This is the basis of economics of unscale. The winning companies in today’s tech surge are companies that profitably give each customer exactly what he or she wants, not companies that give everyone the same thing.
There is another, equally important way in which the current tech wave is propelling economies of unscale. Because companies can stay nimble and focused by easily and instantly renting scale, they can adjust more quickly to changing demand and conditions at much lower cost and with far less effort.
Thus, scaled companies find themselves beleaguered by unscaled competitors. Stripe is an unscaled financial services company based in San Francisco that is challenging the big banks. Airbnb, also based in San Francisco, is an unscaled hotel company that is taking customers away from the big chain hotels. Warby Parker is a New York City-based unscaled eyewear company that is threatening the big eyewear brands.
If economies of unscale will rule in this new world of business, how can a corporation, which, by definition is a large, scaled-up enterprise, compete and thrive? Read the rest here
Wednesday, October 25, 2017
Do-It-Yourself Oceaneering
strategy + business, October 25, 2017
by Theodore Kinni
INSEAD professors W. Chan Kim and Renée Mauborgne hit the thought leadership lottery with the idea of blue oceans. Their 2005 book, Blue Ocean Strategy, Harvard Business School Press, which described the advantages of setting sail for new “blue ocean” markets devoid of competitors versus battling for percentage points of share in mature, commoditized “red ocean” markets, sold more than 3.5 million copies. The two professors, having found their own blue ocean, quickly ascended to the pinnacle of strategic consulting: INSEAD presented them with an institute and built blue ocean strategy into its MBA curriculum. Given all this success, the only truly surprising thing is that it took 12 years for Kim and Mauborgne to publish a follow-up.
For the most part, Blue Ocean Shift proves to be worth the wait. It is a practical, well-written guide to finding and exploiting blue ocean markets, informed by the experiences of companies and other organizations that have chosen to seek them out rather than compete toe-to-toe in established markets. Read the rest here.
Monday, October 16, 2017
Why Entrepreneurs Should Care Less About Disrupting and More About Creating
MIT Sloan Management Review, October 16, 2017
by Theodore Kinni
Wednesday, October 11, 2017
Take a Timeout, Leaders
strategy+business, October 11, 2017by Theodore Kinni
On July 4, 1845, Henry David Thoreau went to the woods to live deliberately. After spending two years, two months, and two days in a 150-square-foot cabin that he built himself for $28.12 and a halfpenny, Thoreau had worked out the gist of the transcendentalist classic Walden; or, Life in the Woods. In it, he wrote, “I never found the companion that was as companionable as solitude.”
CEOs and other leaders would do well to get on companionable terms with solitude, too, according to first-time authors Raymond M. Kethledge, a U.S. Court of Appeals judge, and Michael S. Erwin, a leadership development consultant and assistant professor at West Point. Leaders don’t necessarily have to get off the grid and live in a hut for two years. But in Lead Yourself First, the authors make an extended argument that leaders should reserve some alone time “to find clarity, creativity, emotional balance, and moral courage.” They illustrate their thesis with numerous examples. Read the rest here.
Tuesday, September 19, 2017
Moving Beyond the Silicon Valley State of Mind
MIT Sloan Management Review, September 18, 2017by Theodore Kinni
To steal a phrase from Anton Chekhov, the great danger of the Age of the Algorithm is that we will know everything and understand nothing. In his new book Sensemaking, a polemic defending the need for the liberal arts in business, Christian Madsbjerg, a founder of strategic consulting company ReD Associates based in Copenhagen and New York, argues that leaders shouldn’t try to know everything. Instead, they should try to make sense of something.
Madsbjerg offers up sensemaking as the antidote to algorithmic thinking — “a Silicon Valley state of mind” that relies exclusively on data for direction. Relying on data alone is taking “a journey determined by the reductions of a GPS,” according to the author. Sensemaking is the North Star: It provides the essential context for data — the rationale for collecting it and the perspective needed to gain insight from it.
In the excerpt below, Madsbjerg tells the story of Napa Valley’s Cathy Corison, comparing her approach to wine making with the data-driven approach of Leo McCloskey, founder of Sonoma, California-based Enologix, Inc., to illustrate the difference between traveling by the North Star and the GPS. Read the excerpt here.
Wednesday, August 2, 2017
A Goldilocks Approach to Innovation
by Theodore Kinni
In 2008, when Nike executive Sarah Robb O’Hagan was tapped to lead Gatorade, the sports drink’s sales were in decline and it was losing market share to its principal rival, Powerade. She couldn’t turn to incremental innovation: Pursuing the tried-and-tested strategy of adding flavors and low-calorie options to the Gatorade portfolio had already run its course, and was not yielding returns. The idea of blowing up one of PepsiCo’s billion-dollar brands and the organization behind it in a bid for radical reinvention was too risky.
What did Robb O’Hagan do? Taking a page from Nike’s playbook, she refocused the company’s attention — and more meaningfully, its product development and marketing budgets — on Gatorade’s core customers: the serious athletes, young and old, who accounted for 46 percent of sales. Then, she began introducing new hydration and nutrition products designed particularly for that core group. Gatorade introduced a series of gels, bars, and protein shakes that complemented the sports drink and drove its sales, instead of cannibalizing demand for it.
“The innovations were diverse, targeted a specific set of customers, and posed little strategic risk,” writes Wharton School professor of practice David Robertson, author, with Kent Lineback, of The Power of Little Ideas. The new products also reversed Gatorade’s sales slide. By 2015, Gatorade, with sales of US$5.6 billion, owned 78 percent of the U.S. market for sports drinks, about four times Powerade’s 19 percent share. Read the rest here.
